People create trusts for several reasons. Typically they are established to minimize the probate process after death and to correctly allocate assets to beneficiaries at a specified time or in increments over a more extended period.
Some trusts are used for charitable purposes.
While the settlor or trust grantor is living, the trust is usually revocable. This means he or she can make changes at will, and your rights as a beneficiary to challenge are very limited. The settlor may change beneficiaries and even trustees whenever he or she chooses.
Once the settlor dies, the trust becomes irrevocable, and changes are possible only in exceptional instances.
Trustees and Successor Trustees
By law, the responsibilities of a trustee and successor trustee are clearly defined. Each carries specific obligations to manage assets accurately, honestly, and in a timely fashion after the settlor’s passing to ensure the assets from the trust are disbursed as intended.
The obligations of a trustee and successor trustee are the same. Typically, the successor will only act if the primary trustee has predeceased the settlor, is mentally incapacitated or simply doesn’t want the responsibility.
Although trustees and successor trustees have rights and responsibilities to manage the handling and execution of the trust, respectively, beneficiaries do have legal recourse if these designees appear to be handling the trust improperly or illegally.
What are a Trustee’s Duties?
A trustee is empowered to manage all assets held in trust. When a settlor hands over assets to a person or an institution, perhaps a law firm or a bank, in a trust arrangement, that recipient becomes the trustee and has a fiduciary responsibility to the beneficiaries. The trustee holds title to the assets on behalf of all beneficiaries.
Much like an executor of a will, a trustee manages closing out of the trust and distributing the property according to the settlor or grantor’s final wishes. The trustee must follow the instructions of the settlor, whether disbursing the assets immediately upon death or over several years. The final disbursements can only occur after all debts, expenses, claims, and taxes have been settled.
Unless otherwise specified, the trustee may have the power to sell property, invest, and even to borrow from the trust.
Your Rights as a Beneficiary
Although laws vary among the states, current beneficiaries do enjoy fundamental rights in an irrevocable trust situation. These include:
- The ability to request information to ensure the trustee or successor trustee is handling the assets properly.
- The right to an accounting that clearly shows income, expenses, and distributions from the trust
- The right to petition for the removal of the trustee or successor trustee if the person is not acting in the best interest of the current and future (remainder) beneficiaries.
Some valid reasons for petitioning to remove a trustee or executor include:
- Violation of the terms of the trust
- Incapacity or incompetence
- Failure to provide accurate accounting and reporting
- Stealing or self-serving
- Demonstrating severe and continuous hostility toward the group of beneficiaries
If you are a current beneficiary who feels the trustee or successor trustee of an irrevocable trust is mismanaging the responsibilities, you should consult an experienced estate planning or probate lawyer who can help you take the proper legal steps.
About Giuditta Law
Nick Giuditta provides sound advice for a variety of estate planning issues, including wills, trusts, durable powers of attorney, probate, and estate administration and other elder law matters.